BJP willing to go with govt for raising FDI in insurance to 49 pc

The frequent run-ins between the ruling side and the Opposition may not push important reform legislations off the table in the Budget session, but, BJP leader Yashwant Sinha recently told ET that his party was open for talks with the government on hiking the quantum of FDI in the insurance sector.

This development comes in the backdrop of intense lobbying by foreign and domestic players for raising ceiling in the insurance sector to 49 per cent from the existing 26 per cent. Former US envoy Frank Wisner, who had worked with the US-based mixed financial services and international organisation AIG, and a group of CEOs have been interacting with senior leaders of the government and Opposition including Sinha on raising the FDI cap.

“We are open for a discussion with the government. But government leaders are yet to approach us. The BJP will take a call on the bill after talks with the government,” Sinha told ET.

Sinha said Wisner and other insurance company officials were not enthused by the proposal to allow FIIs in the insurance sector. According to insurances companies, FIIs may not fulfill the capital needs of the sector.

A section of the leadership here is also of the view that proposal to permit FIIs to own up to 23 per cent could only bring hot money into the country.

A section of the government had mooted 23 per cent FII investment, following BJP’s reservations over hiking the quantum of FDI beyond 26 per cent. Sinha’s assertions indicate a willingness to consider revising this position. “I cannot hazard a guess on our position now. I am told the government is working on a new formula. We have to discuss it in the party,” Sinha said.

In its report, Parliament’s standing committee on finance had rejected the proposal to hike the FDI cap in the insurance sector to 49 per cent, saying this may not have the desired effect and could expose the economy to global vulnerability. The panel, headed by Sinha, however, had agreed with the need to bring in comprehensive changes in the archaic laws governing the insurance sector.

The Insurance sector was opened up for private sector in 2000 after the enactment of the Insurance Regulatory and Development Authority Act, 1999 (IRDA Act, 1999). This Act permitted foreign shareholding in insurance companies to the extent of 26 per cent with an aim to provide better insurance coverage and to augment the flow of long-term resources for financing infrastructure.

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